The Karoon Gas Australia Limited (ASX: KAR) share price has been one of the biggest movers on the All Ordinaries (Index: ^AXAO) (ASX: XAO) this morning. At the time of writing the oil and gas producer's shares are up 8% to $1.61.
Unfortunately though for shareholders, today's gain is in fact a rebound following an 18% drop yesterday.
Why did its share price collapse yesterday?
Back in November Karoon Gas was dealt a huge blow after it emerged that court proceedings had been filed against energy giant Petrobras and Brazil's national petroleum, natural gas, and biofuels agency (ANP).
The court proceedings alleged that the sales process, relating to the Baúna and Tartaruga Verde oil fields, didn't comply with Brazilian regulatory requirements.
This led to an interim injunction ordering Petrobras and the ANP to cease the sale process, leaving Karoon Gas' acquisition hanging in the balance.
Unfortunately Petrobas advised the company yesterday that the process relating to the sale of Baúna and Tartaruga Verde has now been withdrawn and will be reinitiated in the near future.
According to the release Petrobas believes doing so will help reduce the risk of any future court action against a potential sale and provides greater certainty to the successful bidder.
What next?
Karoon Gas will be free to bid for the oil fields again. However, this time it will not have the advantage of being in exclusive negotiations with Petrobas. This opens the door for other bidders to snare the valuable assets from under its nose.
While the company could yet win the bidding process, I would suggest investors hold off an investment until it is successful in doing so.
In the meantime investors looking for exposure to the resources sector might be better off with an investment in South32 Ltd (ASX: S32) or Galaxy Resources Limited (ASX: GXY).
